Newport Corp.is considering the purchase of a new piece of equipment.The cost savings from the equipment would result in an annual increase in cash flow of $200,000.The equipment will have an initial cost of $900,000 and have a 6-year life.There is no salvage value for the equipment.If the hurdle rate is 10%,what is the approximate net present value? Ignore income taxes.(Future Value of $1,Present Value of $1,Future Value Annuity of $1,Present Value Annuity of $1. )(Use appropriate factor from the PV tables.Round your final answer to the nearest dollar amount. )

Question

Quizplus · Accepted Answer

The correct answer is A. The net present value is calculated as the present value of the cash inflows minus the present value of the cash outflows. The present value of the cash inflows is $200,000 x (PVAF 10%, 6) = $952,381. The present value of the cash outflows is $900,000. Therefore, the net present value is $952,381 - $900,000 = $52,381.